Discussion Paper - Regulation of Financial Holding Companies (May 2018)

Summary

This is a Bermuda Monetary Authority discussion paper (not yet a rule) exploring whether and how the BMA should directly regulate Financial Holding Companies (FHCs) that sit atop banking and insurance groups in Bermuda. It sets out proposed criteria for designating certain FHCs for regulation, shareholder control approval requirements, corporate governance expectations, and group-wide prudential requirements, and invites industry feedback before any legislation is drafted.

• Designation: Only FHCs designated by the BMA (based on risk criteria such as being the ultimate or a significant intermediate holding company of a Bermuda bank, insurer or other regulated entity) would be subject to the new framework; a list of designated FHCs would be published.
• Non designated FHCs: FHCs not designated for regulation may still be required to furnish information to the Authority to support its oversight functions.
• Shareholder control: Substantial and controlling shareholders of a designated FHC would need BMA approval, consistent with existing Banking Act or Insurance Act thresholds.
• Governance: Designated FHCs would face corporate governance requirements on directors and key persons, consistent with existing banking and insurance regulatory acts.
• Prudential requirements: Proposed group-wide capital adequacy rules, lending and investment concentration limits, regular reporting, on-site inspection powers, and civil/administrative penalty powers for FHC groups.
• Statement of Principles: The BMA would issue a Statement of Principles on how it intends to use its FHC Act powers (designation, conditions, information gathering, capital adjustments, directions, civil penalties).

The paper is a consultation seeking industry views; it does not itself create binding legal obligations. The BMA states it intends to follow up with a formal Consultation Paper and draft legislation after reviewing feedback.

Key obligations

• Interested persons wishing to comment must send feedback on the proposals to policy@bma.bm by 31 July 2018

Applies to

financial holding companies, banks, insurance companies, financial groups, non-operating holding companies

Deadlines

• 31st July 2018: Deadline for industry and other interested persons to submit comments and suggestions on the Discussion Paper's proposals to policy@bma.bm